No luck with my first trade of the third quarter as I decided to close my USD/CAD long down this afternoon after a sharp move lower. Here’s a quick review.
USD/CAD Uptrend Swing Play
Last week, I decided to take a long position in USD/CAD to play the slow grind higher in the pair, and the potential for a big rebound in U.S. employment data. I did so by putting up orders to buy on a pullback to a previous support area, which was triggered at 1.3550 a couple of days later.
Well, we got the big rebound in U.S. employment data (Record U.S. jobs gain of 4.8 million in June smashes expectations; unemployment rate falls to 11.1%), but unfortunately for my trade, no major U.S. dollar rally as it actually traded mixed on the session.
With the uptrend still holding, I decided to hold onto the position into this week, where we saw a USD/CAD rally in the Tuesday trading session, likely on risk-off sentiment as equities took a step back from its recent rally.
But today was a different story as risk sentiment swung back positive to push the U.S. dollar lower, which likely helped the Canadian dollar and oil prices move higher.
This created a picture on the one hour chart above where the rising trendline was broken and turned into resistance, and with broad U.S. dollar sentiment generally negative given the massive Fed stimulus in the system, I decided to close the trade down manually at market (1.3515):
Total: -35 pips / -0.19% loss on 0.50% risk taken
Looking back, I probably should have closed the trade down after the very positive U.S. employment data didn’t spark a strong dollar rally. That’s what I was playing for anyways, so when that didn’t happen, my idea was invalidated from the point.
But it looked like price was holding and sentiment was souring a bit due to rising COVID-19 cases, so that’s why I held and why I think it wasn’t completely wrong to hold onto the trade.
Looking forward, I’ll stay away from U.S. dollar longs for now as negative risk sentiment days don’t see to have legs in this environment. Until that changes, I’ll look at Greenback bounces as opportunities to short for both short-term and longer-term opportunities.
Stay tuned for those updates, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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